Plenty of Ugliness for Everyone as Dow, Nasdaq Slump Into Long Weekend - TheStreet

SAN FRANCISCO -- So dour was the mood on Wall Street today that even the American Stock Exchange Biotech Index -- which more-than doubled from Dec.20 through yesterday -- fell 4.1%.

There were some big winners (again) among biotech and small-cap stocks, but even those high-flying groups took their cues from the blue-chips today. The latter continued to suffer amid the prospect of higher interest rates, even as the latest economic data showed little signs of inflation.

The

Consumer Price Index

rose 0.2% in January, a touch below expectations while the core rate rose 0.2%, in line with consensus. In reaction, the price of the 30-year Treasury bond rose 30/32 to 101 9/32, its yield dipping to 6.16%.

But the stock market shared none of the bond market's glee, opening on weakness and continuing on a downward path only briefly stemmed in the session's final hour. In addition to fundamental concerns about more rate increases, technical factors such as options expiration and the breach of key support by the

S&P 500

futures weighed on the market.

Specifically, futures' decline through support at around 1380 early in the session and then 1362 mid-afternoon soured sentiment, traders said. The futures settled down 32.20 to 1353.30.

The S&P 500 cash closed down 42.19, or 3%, to 1346.07 and is now 8.4% below its

Dec. 31 all-time high of 1469.25 .

Technical factors were "just one of many things" impacting the market, said Randy Billhardt, co-head of block trading at

PaineWebber

. "People are concerned about what

Greenspan

said

but a combination of double expiration in front of a long weekend probably exacerbated the situation."

U.S. financial markets are shuttered Monday in observance of

President's Day

.

The

Dow Jones Industrial Average

continued toward a likely retest of 10,000, falling 295.05, or 2.8%, to 10,219.52 after trading as low as 10,199.98. The point loss was the seventh-largest in Dow history, although the percentage decline was not historically significant. The venerable index is now down 12.8% from its all-time best of 11,722.98, set

Jan. 14.

Interest-rate sensitive components spearheaded the Dow's decline, notably

American Express

(AXP) - Get Report

,

General Electric

(GE) - Get Report

and

J.P. Morgan

(JPM) - Get Report

. The

Philadelphia Stock Exchange/KBW Bank Index

slid 3.2%.

Cyclical components such as

International Paper

(IP) - Get Report

and

3M

(MMM) - Get Report

also tumbled. The

Morgan Stanley Cyclical Index

fell 2.3% while the

Philadelphia Stock Exchange Forest & Paper Products Index

fell 5.4%.

The Dow got no help from technology giants

IBM

(IBM) - Get Report

,

Intel

(INTC) - Get Report

and

Microsoft

(MSFT) - Get Report

.

The

Nasdaq Composite Index

fell 137.11, or 3%, to 4411.81 after trading as low as 4404.61. The

Nasdaq 100

shed 3.9%. The

Philadelphia Stock Exchange Semiconductor Index

fell 4.4%.

TheStreet.com Internet Sector

index fell 47.87, or 4.2%, to 1096.62 while

TheStreet.com New Tech 30

fell 19.72, or 2.6%, to 711.12. Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. A list of index components is available at

http://www.thestreet.com/newtech/.

Among tech stocks with news,

Novell

(NOVL)

fell 20.5% after reporting disappointing revenue growth.

Global Crossing

(GBLX)

shed 14.7% after posting a

wider-than-expected loss.

Despite continued gains by select small-caps, such as

Ribozyme Pharmaceuticals

(RZYM)

, the

Russell 2000

fell 12.75, or 2.3%, to 545.67, ending its two-session streak of record-setting closes.

In

New York Stock Exchange

trading, 1.03 billion shares were exchanged while declining stocks swamped advancers 2,303 to 704. In

Nasdaq Stock Market

action 1.87 billion shares traded while losers led 2,618 to 1,586. New 52-week lows whipped new highs 260 to 29 on the Big Board while new highs led 326 to 137 in over-the-counter trading.

"I don't think the sellers were incredibly aggressive, buyers just took a vacation," Billhardt said, suggesting expiration inflated the volume. "There was money coming out of tech into stocks that have been bean beaten up," including retailers such as

Kohl's

(KSS) - Get Report

, which gained 2.7%.

"We're in a bear market for every group except tech," the trader said. "I¿m not sure what the catalyst will be for people to make a switch from tech to more fundamentally sound stocks trading at low P/Es, but I think at some point investors are going to have to take a hard look at groups that have underperformed but have good prospects."

Bull on the Run?

Following today's decline market watchers agree the technical picture is not pretty.

Ironically, "the very bit

of the market people were frightened of are all definitely in powerful uptrends still, only the boring old economy stocks are struggling," said Robin Griffiths, chief technical analyst at

HSBC James Capel

. "The one place you might have argued is a bubble is nowhere near breaking down; it's the heavy blue-chips" that are in danger.

Today's decline "doesn't do anything" to the Comp's upward trend, Griffiths said, suggesting the tech proxy has near-term support at 4200 and 3800, while its 200-day moving average is down at 3103.

The Dow, however, "has a completely different chart pattern" and has now violated "all significant levels," save the lows just under 10,000 hit last October, he said. "We absolutely need that low to hold or it isn't a bull market anymore."

Comporable levels for the S&P 500 are around 1240, while the Nasdaq's October low was 2600.

Griffiths remains "voraciously bullish" about the so-called new economy paradigm but conceded if the Dow were to break its bullish pattern "that will get through to the consciousness of the investing public."

The technician believes major averages will rally "between pretty damned soon and the presidential election." But he worries a true bear market could ensue shortly after the first Tuesday in November (regardless of who wins).

Among other indices, the

Dow Jones Transportation Average

fell 39.56, or 1.6%, to 2430.80; the

Dow Jones Utility Average

slid 5.13, or 1.7%, to 298.86; and the

American Stock Exchange Composite Index

shed 5.50, or 0.6%, to 931.96.

For the week, the Dow lost 1.9%; the S&P 500 fell 3%; the Nasdaq Comp rose 0.4%; the Russell 2000 advanced 1.6%; the DOT shed 5%; the New Tech 30 hopped 4.7%; the Dow transportation average dipped 0.2%; the Dow utility average slipped 2.3%; and the Amex composite added 4.8%.

Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately

.